Posted by Pete Stolcers on November 1
Posted 9:00 AM ET – This is where the rubber meets the road. Yesterday I mentioned that the market needs to breakout now or it will compress in a tight trading range the rest of the year. Strong earnings, good economic news and a dovish Fed statement need to fuel the next leg higher. Judging from the price action this morning we are going to see a nice rally.
Facebook will post earnings after the close and Apple will post earnings tomorrow. Mega cap tech stocks have performed well after announcing results. In general, stocks have exceeded expectations by 9%. This is very bullish and earnings season is climaxing.
The FOMC statement will be released today. Analysts are expecting a new Fed chairman and the rhetoric should be tame. They don’t want to spook the market during this transition. Furthermore, they can’t gauge the lingering effects of the hurricane and they should remain cautious. During the last statement they indicated that 4 rate hikes were possible next year. Inflation has been lower than expected and there is a good chance the comments will be dovish.
The economic news has been good. ADP showed that 235,000 new jobs were created in the private sector during the month of October. This was a solid number and Friday’s Unemployment Report should be strong (285,000 expected). ISM manufacturing will be posted 30 minutes after the open and a strong reading of 58.8 is expected. GDP came in at 3% last week and economic growth is better than we’ve seen in years.
Republicans plan to release their tax plan tomorrow. The possibility of tax cuts will keep a bid to the market. Any rumor of progress will fuel the breakout.
Seasonal strength is also in play.
Swing traders should be long calls. This is going to be a profitable day and I can feel the breakout. Use SPY $255 as your stop on a closing basis. If we get a nice run, we will start moving the stop higher.
Day traders need to be very cautious today. The market will explode higher and flat line into the FOMC statement. It will be very tough to make money ahead of the release. However, you can trade the FOMC move. Wait for the momentum to be established and join the direction.
This is “go time”. The market needs to rally the rest of the week. This is the final push higher for 2017. Stay long and ride the profits.
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